Category: Washington Nationals

D.C. approves $200m or more in spending on Nats stadium upgrades, calls this “no new cost” to taxpayers

access_time personNeil deMause

Tomorrow is Thanksgiving, the day when the United States celebrates the ancestors of some of its ruling class accepting lavish gifts from local residents, while famously providing in exchange smallpox and pain and degradation.

In completely unrelated news, the Washington, D.C. council voted yesterday to approve $515 million in upgrades for the Capitals and Wizards arena that we’ve known about since April, and while doing so they also approved funneling a large but unspecified amount (more on that momentarily) of tax money to the Nationals for upgrades to their stadium, in exchange for the team continuing to play in D.C. for an additional 13 seasons:

On Tuesday, the D.C. Council passed legislation to create a dedicated stream of revenue that the Nationals could use for upgrades and maintenance at Nationals Park, with no new costs to D.C. …

“We’re talking about a site that is generating 150 events per year,” [councilmember Charles] Allen said of the ballpark. “That type of return on investment is what we want, the same way the arena is a place where 250-plus events is creating the investment and the return that comes back on that. It’s a bit ironic we’re voting on both these things on the same day — we don’t want to find ourselves in a position like we did last year.”

Allen did not mention that although the district paid to build the stadium and owns it, Nats owner Mark Lerner gets to keep all the revenue from those 150 events a year. D.C. does get $5.5 million a year in rent from the team, plus whatever sliver of sales tax money it gets from those events that would not be spent in the city otherwise, but that’s nowhere near enough to cover the roughly $30 million a year D.C. is on the hook for in stadium debt. The rest is covered by district business and additional sales taxes that are being diverted to pay off stadium bonds.

Those bonds will paid off soon, though, thanks to tax proceeds coming in — and going back out to pay for the stadium — faster than expected. Which means those tax streams will soon be available to D.C. to pay for other public needs. Or would be, if Lerner weren’t angling to get it for future stadium upgrades instead. As a previous Washington Post article from January noted:

[D.C. Council Chair Phil] Mendelson’s legislation would create the Ballpark Maintenance Fund, ensuring a steady stream of dedicated money — with no new costs to D.C. — that could go toward repairs and improvements that the Nationals had been asking for under the terms of the team’s lease at the ballpark with the city….

“We made a commitment to the team we would build the stadium and we would maintain it, and we just don’t need these stories about deferred maintenance and failing scoreboards,” he said. “So let’s provide a certain path that we’re going to maintain our facility and maintain it as a very attractive ballpark in the major leagues.”

That’s two separate Post articles saying the new funding would be at “no new costs to D.C.,” which is wrong on two counts: 1) D.C. already shelled out the money it promised the Nats owners to pay for stadium construction, so handing over any leftover tax money as well is absolutely a new cost, and 2) the Mendelson legislation would continue to kick back stadium sales tax proceeds and Nats rent payments after the team’s current lease expires in 2037, which is even more a new cost.

How much in new public subsidies this would add up to is unclear: Ol’ “Democracy Dies in Darkness” didn’t bother to calculate a figure, and the D.C. council website doesn’t appear to have entered the bill into the record yet. But if we assume it would amount to at least 13 more years of the same $5.5 million a year in rent and roughly $12.5 million in sales tax money, plus whatever is left over in the current stadium account … let’s estimate the total at upwards of $200 million and leave it at that, though it obviously could end up much more. Lerner still has to okay a lease extension through 2050 to cash his check; one hopes that the D.C. council will post any new lease terms for the public to read, but one probably shouldn’t hope too hard.

This kind of last-minute-before-holiday-weekend stadium renovations approval is going around: Harris County, Texas just approved $35 million in fresh spending on new scoreboards for the Houston Texans to avoid “an embarrassing, unrecoverable failure mid-season.” (No, it wasn’t explained what kind of scoreboard failure would be “embarrassing [and] unrecoverable”; they just can’t get spare parts for the old displays, so presumably we’re not talking about something like this.) And that’s only part of potentially $264 million in upgrades the county is looking at making over 20 years, quintuple its current operating budget for repairs. The grift that keeps on giving is a nice benefit, if you can convince the natives to cough it up.

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Wizards, Caps, Mystics owner wants $600m in public cash to redo his privately owned arena

access_time personNeil deMause

Washington Wizards, Capitals, and Mystics owner Ted Leonsis is reportedly asking Washington, D.C. for some money to renovate his arena, which opened in 1997, according to a Washington Post story that I almost missed because it dropped on Friday night. How much money, you ask? Well, the Baltimore Orioles and Ravens up the road are each getting $600 million (plus more if the state wants), what do you say we do $600 million?

The funding would make up the bulk of an $800 million renovation plan Monumental has outlined to the city, according to the two people, who spoke on the condition of anonymity to discuss sensitive negotiations. The remaining $200 million would be covered by Monumental, which is owned by founder and chief executive Ted Leonsis.

One of the people outlined the ask: Monumental would receive the $600 million over four years and use it mostly on construction. The major priorities are to transform the seating bowl — fewer nosebleed seats, more seats close to the court and ice — as well as add a food court that would be open during nongame hours and a new, glassy entrance at Seventh and F streets. Monumental wants to do incremental construction over four consecutive summers, starting in 2024, to avoid disrupting the playing seasons of the Capitals or Wizards, this person said.

The source here is “two people with knowledge of the situation,” which isn’t very specific at all, but the details are detailed enough that it seems like they’re coming from somewhere, anyway.

The teams’ arena is owned by Leonsis’s company Monumental Sports & Entertainment, and there’s nothing requiring D.C. to fund upgrades, but district officials sound pretty copacetic about writing some kind of large check regardless. D.C. Mayor Muriel Bowser, asked about the possible arena renovation subsidy, replied with a joint statement with Monumental saying that “The District recognizes that Capital One Arena serves as an important economic anchor as we continue to reimagine and reinvigorate our Downtown,” so that certainly sounds like the district and Leonsis are working together on something. D.C. Council chair Phil Mendelson said he would need to know the details of any plan before taking a position, but did say he in general “supports giving Monumental public funds because the arena is an economic anchor in a fragile downtown” (the Post’s words, not his).

And before you can get your bearings on this apparent $600 million ask that seems to have its political skids well-greased, the Post drops word down in paragraph six that Nationals owner Mark Lerner wants his own pile of public cash:

The Nationals, in September, sent local leaders a letter asking the city to repurpose parts of the existing “Ballpark Revenue Fund,” which is dedicated to paying off the municipal bonds floated to fund the construction of Nationals Park, into a “Ballpark Modernization & Sustainability Fund.” The proposal would put taxes on tickets, food and merchandise, taxes on parking and the lease payment into a new fund to maintain and modernize the city-owned ballpark, but it wouldn’t create a new tax or pull from other budgets.

That’s super-confusing wording, but it certainly sounds like now that the Nats’ stadium is two-thirds paid off, Lerner wants the taxes on in-stadium spending that are being currently kicked back to pay for about 30% of the cost of the stadium to start being kicked back instead to pay for future renovations of the stadium. How much would that amount to? The in-stadium tax money was initially projected to amount to $11-14 million a year back in 2004; I can’t find any more recent figures, but just assuming a standard rate of inflation that would be $20 million a year today, and more in the future, meaning Lerner’s ask could easily be worth well over $300 million in diverted future taxes that would otherwise go to the district treasury.

With the way stadium subsidy numbers are going, it’s easy to start getting a little jaded — oh, only $300 million, at least that’s not over a billion like some MLB owners I could mention. But between the Wizards, Capitals, Mystics, and Nationals, D.C. could easily be looking at over a billion dollars to zhuzh up sports venues that it expected to be done paying for now — and in the case of the arena didn’t even pay for in the first place — just because “economic anchors.” How big an anchor are they? Oh, hello, Stanford sports economist Roger Noll:

Noll said even when a new stadium is built, a city gets about as many full-time jobs as a Macy’s department store.

Nobody ever talks about spending $600 million to upgrade a Macy’s, but then, Macy’s probably doesn’t have as many lobbyists.

 

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D.C. spending tax money on Nats stadium faster than expected, local TV station hails this as success

access_time personNeil deMause

As any semi-regular reader of this site already knows, there is a lot of bad journalism going on out there around sports stadiums and arenas. But once in a great while comes an article that reaches new, heretofore-unseen levels of badness, and one can only marvel at the human ability for innovation.

One such article ran yesterday on the site of Washington, D.C.’s WUSA TV station, under the headline “Can sports stadiums be good business for taxpayers?” (An accompanying video report is linked at the top of the web item.) Not a promising start, but at least you’d expect a routinely bothsidesed piece along the lines of “some team owners and politicians say yes, people who’ve actually studied it say no.” But WUSA ups the ante with this key cluster of paragraphs:

[University of Maryland Baltimore County economist Dennis] Coates has studied and written papers on the impact of professional sports venues on local economies for years.

“I mean, maybe they break even,” Coates said when asked if local government’s make back what they invest in stadium and arena construction. “But that’s highly doubtful.”

But data obtained by WUSA9 revealed that’s turning out not to be true of Nationals Park. According to the DC Office of the Chief Financial Officer, the District is ahead of schedule repaying the bonds it took out to help build it.

A little more than halfway through the deal, the District has paid back 67% of the debt thanks to excess revenues generated from all the growth in Navy Yard. In fact, $102 million of that excess revenue is being funneled to D.C.’s general fund over the next five years.

That, to put it bluntly, is not how taxes work, or at least not how the conjunction “but” works. And it’s especially not how the taxes that are being funneled into paying off Nationals Park work. More than half of that money is coming from a new tax surcharge on D.C.-area businesses, and while it’s nice that those businesses are doing well and tax revenues are up, it’s hardly money “generated from all the growth in the Navy Yard”: If D.C. had passed the same tax and put the proceeds into the general fund, it would now have an extra $300 million or so to spend on schools or roads or something.

More than half of the remainder, meanwhile, is coming from sales taxes on tickets and in-stadium concessions sales, a large chunk of which is certainly being redirected from other spending that would have generated sales tax revenues for the general fund. (Unless you think that nobody who goes to Nats games would have set foot in the city otherwise; given the proximity of suburbs outside the city limits, the cannibalization effect is likely less in D.C. than in some other cities, but it’s still going to be significant.) So again, “the District is ahead of schedule repaying the bonds” is just a sign that it’s siphoning off tax revenue from the general fund faster than expected.

Coates appears to be on vacation and thus not immediately able to respond, and the foremost Twitter guardian against terrible economic reporting, J.C. Bradbury, is busy dragging The Oklahoman editorial board for writing that giving $850 million to the Thunder owners for a new arena is “more nuanced than dollars and cents,” sure, that’s another strong contender for worst journalism of the week, though at least that didn’t claim to be a news article. But really we don’t need any fresh takes on this, because we covered all this seven years ago, when a Washington Times sports columnist made the exact same argument — prompted by then-D.C. councilmember Jack Evans, who spearheaded the push for the Nats stadium subsidy in the first place — and it was equally nonsensical then.

In the end, this all ends up being a variation on the Casino Night Fallacy that any money that is somehow touched by a development deal somehow becomes money attributable to that deal, even if it’s tax money that the government could have otherwise pocketed to use on something else. For a conceit that was come up with by an unheralded Odd Couple scriptwriter — okay, actually Lowell Ganz, who is Hollywood comedy royalty even if he also was co-creator of “Joanie Loves Chachi” — it has proven surprisingly strong at explaining one way in which people can be convinced to get things entirely wrong. I can only hope that one day it will make its appearance on my favorite Wikipedia page, without which I would never have known what a Chewbacca defense is.

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Friday roundup: Billionaires all over get cash for their stadiums and arenas and car plants and movie shoots (I got a rock)

access_time personNeil deMause

Happy Friday! Ready for a heaping helping of news about America’s elected officials and business leaders working together to ensure smart investments of public dollars that will build a better tomorrow? If so, I am sorry to inform you that you have accidentally clicked on the wrong website, but if you stick around you may be rewarded with some grim laughs, or at least some links to old comic strips.

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Nats Park probably won’t be shut down amid squabble over failed development, but it’s fun to imagine

access_time personNeil deMause

There’s a long history across many cities of “ballpark district” developments failing to come to fruition, or at least taking way longer than initially planned, and the Washington Nationals stadium environs were no exception. Though construction has picked up in recent years, there’s still 46,000 square feet of commercial and retail space that Events D.C. promised to build that hasn’t happened, and now the District is apparently threatening not to renew the stadium’s certificate of occupancy when it expires at the end of the month if Events D.C. doesn’t agree to follow through on its promises:

Instead of the original development, Events DC has proposed to finish a considerably smaller, 17,000-square-foot structure that’s already attached to the ballpark at First Street SE and Potomac Avenue SE as retail-only space…

The Department of Consumer and Regulatory Affairs, in a maneuver upping the pressure on Events DC to follow through on its promised development, has said it will not renew the temporary certificate of occupancy the ballpark has used to operate since Opening Day in March 2008.

That certificate is set to expire Sept. 30, according to the Washington Business Journal, which first reported the snafu. The Nationals’ final home game of the season is scheduled for Oct. 2.

This is unusual not just in that it’s a rare example of a city government playing hardball with a developer, but of just who the developer is: Events D.C. is the District’s own quasi-public development arm, which owns and operates Nationals Park, in part to get the team owners off the hook from construction and property tax costs. One arm of government going toe-to-toe with another in a dispute over failed promises is about three steps beyond “unusual,” but here we are.

Whether this is seriously a threat that the Nats will have to go play their final home games of the year in the street (or just forfeit, they’re going to lose them anyway) depends on which newspaper you read: The Washington Post says the DCRA is “effectively threatening to shut down the stadium,” while the Washington Business Journal, which first reported on this kerfuffle on Thursday, indicates that it’s more Events D.C. using brinksmanship to renegotiate its deal, asking for a last-second rework of its development plan in order to get a permanent C of O in place by the end of the month. Events D.C.’s lawyer wrote in the company’s zoning application that DCRA “has indicated it is unwilling to issue another temporary certificate of occupancy while the Applicant continues to identify ways to satisfy the Order,” but that’s less an overt eviction threat than a developer threatening that it will be forced to shutter its building if not allowed to back out on its commitments — so if somebody’s playing hardball here, it’s probably not the city government.

As for the Nationals owners, they didn’t respond to the Post’s request for comment, but they did reply to the WBJ, saying in an emailed statement: “We are confident that as Events D.C. and the D.C. Zoning Commission work out the final terms of a permanent certificate of occupancy, we will continue to operate without restrictions as we always have.” All of which seems likely, since the District has no particular reason to want to padlock the stadium, even if it also has no reason to want to approve Events D.C. building a building one-third the size of what it promised. The D.C. Zoning Commission has a hearing scheduled on this whole mess for Sept. 29, one day before the certificate of occupancy expires — if nothing else, this should provide more last-second drama than watching a Nationals game.

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Friday roundup: Reds exec says team will only demand renovation money, threatens to move if fans ask for better players

access_time personNeil deMause

This has officially been the longest week ever. Scientists agree! And so does the news:

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Friday roundup: Pandemic could delay Rams and Chargers stadium, drain hotel tax base for Raiders stadium (and kill millions of people, oh yeah)

access_time personNeil deMause

And so we come to the close of Week 2 of Coronavirusworld, with still little way of knowing what Week 3 will bring, let alone Week 8 and beyond. (I just now started to write about this far less grim response to Tuesday’s London study, until I noticed none of the authors are infectious disease specialists and the claim that contact tracing can keep infections under control was cited to a single Chinese news story that said nothing of the sort, so maybe stay grim for the moment?) With pretty much all of the sports world now shut down, though — except for Australian Rules Football for some reason — sports journalists have begun looking down the road at longer-term effects of the pandemic, resulting in some useful and some not-so-useful reporting:

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Councilmember credits new sports venues for D.C. not being like Detroit, which is lousy with new sports venues

access_time personNeil deMause

Somewhere in the middle of this mess of a World Series media cycle — after the assistant GM berating female reporters scandal but before the booing of Donald Trump and flashing of Gerrit Cole — the New York Times ran a puff piece on Washington Nationals fans that came down to “86 years since a World Series, Baby Shark, our troubled times, blah blah blah.” But Pat Garofalo, in his Billionaire Boondoggle newsletter, noted one paragraph that stood out as exceptionally evidence-free:

When the ballpark opened in the Navy Yard neighborhood 11 years ago, the area was struggling to move past decades of drugs and violence. It was a wasteland of car repair shops, garbage truck parking lots and asphalt factories. But the ballpark led the way for restaurants, condos and hotels, and Audi Field, home of Major League Soccer’s D.C. United, down the street.

We’ve covered the Stadium Catalyst Fallacy in this space before: Look at a sports venue, look at development taking place around it, and declare “mission accomplished.” But when you have a sports facility being built in a neighborhood that is already ripe for development — which was absolutely the case in D.C., if only because there are few sites anywhere in the District that aren’t being eyed for development — then, as Garofalo notes, “We can’t know for sure what would have happened in the alternative universe in which the Nationals never came to D.C. and Nats Park was never built.”

Then Garofalo digs up another recent quote about the Nationals’ alleged economic windfall for D.C. that is even more bizarre:

“Where would we be without the arena, the convention center and hotel, the ballpark, Audi soccer stadium,” Evans asks and answers, “We’d be Detroit, a city still struggling in every respect.”

That’s D.C. city councilmember Jack Evans, the godfather of Nationals Park, in a recent Washington City Paper article about how the stadium deal “nearly fell apart.” (The article doesn’t really explain that bit, but if you want the fuller recap, it’s covered both in the later chapters of Field of Schemes and here on this site as well.) Notes Garofalo:

What a weird comparison for Evans to make: Detroit also has publicly-funded sports stadiums, as well as convention centers and hotels. The chief difference between the cities is that Detroit’s main industry — automaking — went bust, and D.C.’s — the business of government — didn’t. No soccer field or convention center changed that.

I would suggest that we all point and laugh at Jack Evans for being a doofus, but presumably everyone is already pointing and laughing at Evans’ ongoing ethics scandals, so to double down would be cruel, if fun.

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Friday roundup: Ex-D.C. mayor says his $534m Nats stadium expense was worth it, Clippers arena stymied by car trouble, MLS franchise fees to go even higher

access_time personNeil deMause

Shouldn’t posting items more regularly during the week leave less news to round up on Fridays? I’m pretty sure that’s how it’s supposed to work, but here I am on Friday with even more browser tabs open than usual, and I’m sure someone is still going to complain that I left out, say, the latest on arena site discussions in Saskatoon. I guess lemme type really fast and see how many I can get through before my fingers fall off:

 

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D.C. and Houston both predict World Series windfall from visitors from opposing city, what could possibly be wrong with this logic?

access_time personNeil deMause

With the World Series underway, Washington, D.C.’s tourist bureau has estimated that the city will see a $6.5 million windfall from hosting games, partly from added Nationals fan spending and partly from spending by visiting Houston Astros fans:

“We are going to be welcoming business that we would not have without the World Series here,” McClain said. “You can really feel the excitement throughout the city, whether you are watching with folks at local restaurants and bars or just walking down the street seeing all the Washington Nationals gear that people are wearing.”…

“New York is closer, and so people can make that decision to come to D.C. closer to the times of the games. … If it’s Houston, it’s really just a distance thing, in terms of people having to take flights here, and so that just becomes a little bit more limiting in terms of the visitation estimate,” McClain said.

Houston, meanwhile, is excited for the $9 million windfall that the Greater Houston Partnership estimates the city will receive thanks to visiting Nationals fans:

“It’s wonderful hosting the World Series because it gives us an opportunity to show businesses and people outside of Houston what a great place this is,” Jankowski said. “It gives an image of a winning team, a winning season and enthusiastic sports fans. Houston needs images like that — not the images we saw with [Tropical Depression Imelda].”

Okay, so here’s the thing about baseball games — in fact, about all sporting events: Only one of the two teams can be the home team. Depending on how long the World Series goes, Houston will host from two to four home games, and Washington from two to three; and each time fans from one city travel to the other, they leave their home city. So while there may be an influx of big-spending Washington fans in Houston for tonight’s Game 2, there will be that many fewer people spending money in Washington tonight (and, perhaps more the point, that many more Washingtonians returning to town tomorrow with drained bank accounts); and vice versa for Friday’s Game 3 in Washington. “Let’s boost our local economies by first us sending you a bunch of our fans and then you send us a bunch of your fans!” sounds more like a design for a perpetual motion machine than a legitimate economic argument.

There is some positive impact from a World Series game, obviously: A few locals probably do increase their spending somewhat instead of just reducing their other entertainment spending by the same amount, and there are visiting media crews and whatnot who rent hotel rooms and eat dinner the same as baseball fans do. But the numbers are fairly marginal: A 2005 study by economists Victor Matheson and Robert Baade determined that “any increase in economic growth as a result of the post-season is not statistically significantly different than zero,” though they also guesstimated the economic impact at $6.8 million per home game, which is actually quite a bit more than the D.C. and Houston studies are promising.

I just got off the phone with Matheson, who says that the issue is the $6.8 million figure wasn’t statistically significant, so “the answer could be zero,” or could be more. He added that any actual positive impact could come in the form of fans traveling into the city from the suburbs to see games — “you want to be in a Houston sports bar rather than a Galveston sports bar to watch the game” — or from, say, expatriate Astros or Nats fans driving down from Philadelphia to D.C. for games and bringing their spending with them. So the ultimate economic activity numbers being put forward by the D.C. and Houston groups may not be too far off, even if their explanation of them is kind of nutty.

In any event, though, that’s all “economic activity,” which Matheson once memorably defined to me as: “Imagine an airplane landing at an airport and everyone gets out and gives each other a million bucks, then gets back on the plane. That’s $200 million in economic activity, but it’s not any benefit to the local economy.” So really the lesson here for journalists and sports page readers alike is twofold: Take the claims of tourism booster agencies with an enormous grain of salt, and always ask what the tax revenue impact will be, not just the economic activity impact. Or just use your basic brain skills and understand that you can’t make two glasses of water more full by pouring them back and forth into each other, and you can save time on reading news coverage at all.

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